Why China Won't Invade Taiwan
Examining the real reasons China's unlikely to risk war over Taiwan
The Curious Case of the Contented Taiwanese
, known for his ridiculously bad takes on China, wrote this in January 2025:"On New Year’s Eve in Taipei, it’s hard for me not to think about the future that might be coming. It’s hard not to see the streets filled with merrymakers strewn with bodies instead, the shopping malls lying shattered in chunks of rubble, the young people searching in vain for their parents. It’s hard not to look at the towering spectacle of Taipei 101 and imagine it toppled and broken.
It’s hard for me. But it doesn’t seem to be hard for most of the Taiwanese people, who go cheerfully about their partying and their jobs and the quotidian routines of daily life with as little apparent terror as my rabbit munching hay. [...]
There is an easy, laid-back tranquility to this culture like nothing I’ve ever seen, not even in Amsterdam or a California beach town."
Now, this is where it gets interesting. These "rabbits" happen to constitute one of the most well educated and wealthiest populations on the planet. We're talking about a place where half the adult population boasts a college degree. Their median wealth per adult? A cool $115k, the richest in Asia outside Hong Kong ($222k)—including Singapore ($114k). The Taiwanese are not uninformed lemmings munching hay, oblivious to geopolitical winds.
Add to this the fact that these prosperous, highly educated Taiwanese share the same language (Mandarin) with their much larger neighbor, Mainland China. This leads to a rather obvious question: What exactly do these ostensibly calm, well off, and smart Taiwanese understand about their situation that perhaps escapes the more catastrophically minded observer? Do they know something about the unlikelihood of those streets being strewn with bodies anytime soon? Perhaps.
Xi Says "No War"
It's not just the Taiwanese who seem less than convinced of imminent doom. Official pronouncements from Beijing reflect a similar sentiment. President Xi Jinping himself has put it on record: China is not looking to invade Taiwan. His rationale is one of straightforward self interest.
A war over Taiwan, particularly one drawing in the United States, would, according to Xi, "destroy many of China’s achievements and undermine his goal of achieving a 'great rejuvenation' by 2049."
As an ardent student of history, Xi is well aware of the potential for war with established powers to ruin the trajectory of rising powers, as it did with Germany and Japan in World War II, and he will be careful to ensure China does not repeat their mistakes.
Of course, there will be skeptics towards Beijing’s official statements. Hawks in Washington will say this is merely rhetoric for an international audience while invasion plans are being secretly drawn up, but there are some compelling reasons underpinning this stated aversion to armed conflict.
It's an Export Story, Mostly
Consider the nuts and bolts of the Chinese economic machine. China is, to put it mildly, an export powerhouse. It's the world's largest exporter by a considerable margin.
China is responsible for 14% of everything shipped across borders globally.
Manufacturing isn't just a point of pride1 for the Chinese; exporting manufactured goods is the lifeblood of their economy.
And where do these exports predominantly go? Well, the European Union and the United States are China's number two and three trading partners, respectively.
An invasion of Taiwan would trigger Western decoupling and sanctions on China faster than you can say "geopolitical fallout." Such sanctions would slow the recovering Chinese economy, which is grappling with a 15% youth unemployment rate. The prospect of mass unemployment, fueled by a Western economic boycott, leading to social unrest and potentially destabilizing the Communist Party's hold on power, is not something Beijing would lightly entertain.
Even China Can’t Escape the Greenback
China’s reliance on exports naturally bleeds into a profound dependence on the global financial system, a system still very much dominated by the U.S. dollar. For a stark illustration, look no further than Hong Kong, China's premier international financial gateway.
Despite all the geopolitical chest thumping, the Hong Kong dollar remains pegged to the U.S. dollar. This isn't an oversight. It's a necessity, a nod to the greenback's currently irreplaceable role in global trade and finance, even when that greenback belongs to China’s primary geopolitical rival.
Consider the Hong Kong Exchange Fund, one of the world's largest sovereign wealth funds. It's swimming in dollar and euro denominated assets. Foreign currency assets make up a whopping 95% of its total holdings, with U.S. dollar denominated backing assets alone accounting for 55% of the total.
While the Hong Kong Monetary Authority doesn’t disclose the precise breakdown of the remaining 40% in foreign currency, it's a safe bet that a substantial chunk could be frozen by Western nations in the event of a military conflict in the Taiwan Strait. The prospect of having those vast reserves instantly immobilized is a powerful disincentive.
The fear of losing U.S. dollar access is palpable. Even Chinese state-owned banks have shied away from doing business with Hong Kong officials sanctioned by the U.S., lest they too find themselves on the wrong side of the American financial system.
Beijing may grumble about U.S. dollar dominance, even accuse Washington of abusing it, but complaints don't change reality. While the U.S. dollar remains the world's most trusted currency, China, for all its efforts to de-dollarize, must ultimately operate within the dollar’s sphere of influence. An invasion of Taiwan would put its access to that sphere in severe jeopardy.
The Invisible Hand of Investor Fear
A more current and pressing concern than sanctions for Beijing is Chinese companies' access to capital. In 2024, President Xi asked a group of Chinese entrepreneurs why the number of new unicorns in the country had been falling.
On its face, the question is a bit of a head-scratcher. By purchasing power parity, a measure of economic output that adjusts for price differences, China’s GDP is already almost 30% larger than that of the United States. It's a giant.
Yet, if you look at the total value of all the stocks in the U.S., that market capitalization is almost four times bigger than China's.
China’s economy is bigger on paper, but US publicly traded companies are collectively worth four times as much to investors. What gives?
This isn't just a fun fact for finance nerds. This is the "China discount"2 in action, and it has real-world consequences. A lower valuation for Chinese companies means it's harder and more expensive for them to raise the capital they need to grow, innovate, and compete. It directly kneecaps their competitiveness and slows down broader economic development. It is, in short, a direct threat to Xi's grand goal of "great rejuvenation." It’s far more difficult to rejuvenate your nation if your best and brightest companies are perpetually trading at a discount to their global peers, starved of the capital that fuels growth.
This is where the Taiwan situation gets particularly sticky, in a way that goes beyond formal sanctions or asset freezes. Sanctions are a policy tool announced in reaction to certain events. Capital, on the other hand, is a coward. It doesn't wait for a presidential decree or a UN resolution to get scared. It can and does move in or out of a country based on nothing more than the collective gut feeling of thousands of investors assessing risk at any given moment.
Chinese stocks are beginning to crawl out of a three-year-long crater that started back in early 2021. A fragile recovery began to take hold in late 2024, with the Hang Seng Index up 35% since September 2024. Investors are dipping their toes back in the water, thinking the worst is over.
Now, imagine what the mere prospect of a war over Taiwan does to that delicate sentiment, let alone the actual outbreak of one. It wouldn't just erase those recent gains. It would vaporize them and then some. It wouldn’t just cause a bigger China discount; it would risk making Chinese securities fundamentally un-investable for a generation.
Why The Great Illusion Doesn’t Apply
All of the above arguments point to economic disincentives discouraging war. This all sounds very familiar, and not in a good way. If you were a certain kind of European intellectual in 1909, you might have been reading a book called "The Great Illusion" by Norman Angell. His big idea was that the economies of European nations were so intertwined, so deeply integrated, that a major war between them would be commercially ruinous for everyone, victors included. Therefore, war was irrational, and thus, it wouldn't happen.
Of course, four years later, everyone went to war. The Great Illusion became a great historical punchline. So when people say that economic interdependence will prevent a war over Taiwan, a skeptical observer is right to bring up Angell and World War I. Is this just the same flawed logic all over again? No.
While Angell's core premise that war was indeed economically catastrophic was directionally correct, he missed a few things. The context of pre-WWI Europe is fundamentally different from the 21st-century Pacific.
For one thing, 1914 Europe was a web of interlocking alliances. The whole structure was a tinderbox waiting for a spark. An assassination in Bosnia could and did trigger a cascade of treaty obligations that pulled everyone into the fight, whether it was in their immediate economic interest or not. China, on the other hand, famously avoids formal alliances for this very reason. It does not want to be dragged into anyone else's conflicts. This is a feature, not a bug, of its foreign policy.
Then there's the rather large matter of nuclear weapons. In 1914, the worst-case scenario was a really, really bad conventional war. Today, the worst-case scenario between nuclear-armed powers like China and the United States is the end of human civilization. The concept of Mutually Assured Destruction adds a level of deterrence that Norman Angell could not have imagined.
But perhaps the most important difference is the explicit nature of the ruling bargain in China. For the European monarchs of 1914, legitimacy was based on tradition, nationalism, and divine right. For the Chinese Communist Party, legitimacy is heavily transactional and explicitly tied to delivering economic prosperity. This isn't just subtext; it's the main text. It's written down.
Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, the country's guiding ideology, codifies this promise. It makes clear that a core task is to solve the problem of "unbalanced and inadequate development holding back the people's ever-growing desire for a better life." The official doctrine emphasizes a "commitment to our people-centered philosophy of development and work to promote well-rounded human development and common prosperity for everyone", as well as "ensuring and improving living standards through development."
A war that triggers sanctions, capital flight, and economic collapse wouldn’t just a bad policy choice; it would be a direct violation of the Party's promise to its people. It breaks the social contract in a way that would be far more destabilizing for the CCP than the economic fallout of WWI was for the German Kaiser. This time, the economic argument isn't just a matter of rational calculation; it's about political survival.
War as Economic Stimulus? Let's Check the Tape
Okay, but what if the economic disincentives all go away? What if China's economy tanks, youth unemployment gets worse, and Beijing decides it has "nothing to lose" by starting a conflict? This is the "wag the dog" theory.
In an interview with Harvard political science professor and US national security expert Graham Allison at the All-In Summit 2023,
asked this exact question:"You have massive youth unemployment in China and waning growth, so the simplest and most reductive way for China to basically grow and to appease 25% of young people, mostly men, from not uprising is to essentially create demand. The best way to create demand is to essentially create a war machine, and that is why they go to war."
The fundamental premise here is that the Chinese people are so unsophisticated that they will happily trade their standard of living and economic security for a burst of patriotic fervor while their sons and daughters are sent off to die in a brutal war.
This is not true. In fact, the opposite is the case. Due to the massive economic growth of the past few decades, the Chinese people have come to expect a certain, rising standard of living from their government, which has explicitly promised this.
Xi Jinping Thought specifically states a "commitment to our people-centered philosophy of development" and "ensuring and improving living standards through development."
The CCP absolutely must deliver a functioning, growing economy to avoid social unrest. A war that torpedoes the economy breaks the foundational promise that keeps them in power.
We don't need to speculate about this in a vacuum. We have a real-world test case running right now. Since property prices peaked in 2021, China has been navigating a real estate downturn worse than what the U.S. faced in 2008. For a generation, Chinese families poured their life savings into property, believing it was the one investment that could only go up. Now, a huge number of them are underwater on their mortgages and facing foreclosure. This isn't a small sector of the economy; real estate was the engine, accounting for almost 30% of GDP at its peak.
So, faced with a genuine, potentially destabilizing economic crisis, what did Beijing do? It focused on fixing the economy by opening up further to the world. For example, it has taken two very telling steps:
It removed all restrictions on foreign investment in its manufacturing sector, a clear signal that it needs and wants outside capital.
It opened up visa-free entry to 74 countries, the highest number in its history, in a bid to boost its tourism and service industries.
These are not the actions of a regime that has "nothing to lose" and is about to roll the dice on a cataclysmic war. These are the actions of a government that understands its survival depends on economic stability and growth and is willing to become more open and integrated with the world to achieve it. When the chips are down, Beijing's instinct is to save the economy, not to start a war that would surely destroy it.
China-Taiwan is not Russia-Ukraine
A valid, persistent concern among geopolitics observers is the seeming similarity between the Russia-Ukraine and China-Taiwan situations. If Russia invaded its smaller, weaker neighbor, why wouldn’t China? The comparison feels intuitive, but it falls apart when you look at the root causes of the Ukraine war.
Root Cause Analysis: Russia-Ukraine Conflict
In his phenomenal piece Who Caused the Ukraine War?, geopolitics expert
thoroughly explains how Western underestimation of Russia’s military over the past few decades led to the confirmation in 2021 that Ukraine would join NATO, an unacceptable red line for Moscow.“Probably the best evidence that Putin was not seen as a serious threat during his first fourteen years in office is that he was an invited guest at the April 2008 NATO summit in Bucharest, which is where the alliance announced that Ukraine and Georgia would eventually become members. Putin, of course, was enraged by that decision and made his anger known. But his opposition to that announcement had hardly any effect on Washington because Russia’s military was judged to be too weak to stop further NATO enlargement, just as it had been too weak to stop the 1999 and 2004 waves of expansion. The West thought it could once again shove NATO expansion down Russia’s throat.”
Given the weakness of Russia’s conventional military forces, the West thought it could simply ignore Russia’s objections. The West consistently repeated this miscalculation, up until the beginning of the Russian invasion of Ukraine in early 2022.
President Biden, who moved into the White House in January 2021, had long been committed to bringing Ukraine into NATO and was a super-hawk toward Russia. Unsurprisingly, on 14 June 2021, NATO issued a communiqué at its annual summit in Brussels, which said: “We reiterate the decision made at the 2008 Bucharest Summit that Ukraine will become a member of the Alliance.”
Then on 10 November 2021, Secretary of State Antony Blinken, and his Ukrainian counterpart, Dmytro Kuleba, signed an important document – the “US-Ukraine Charter on Strategic Partnership.” […] It also explicitly reaffirms the U.S. commitment to the “2008 Bucharest Summit Declaration.”
As recently as late 2021, Putin attempted to avoid invading Ukraine by using diplomacy to prevent the West from accepting it into NATO.
“On 17 December 2021, Putin sent a letter to both President Joe Biden and NATO chief Stoltenberg proposing a solution to the crisis based on a written guarantee that: 1) Ukraine would not join NATO, 2) no offensive weapons would be stationed near Russia’s borders, and 3) NATO troops and equipment moved into eastern Europe since 1997 would be moved back to western Europe. Whatever one thinks of the feasibility of reaching a bargain based on Putin’s opening demands, which the United States refused to negotiate over, it shows that he was trying to avoid war.”
Days after Russian tanks had entered Ukraine in early 2022, both sides began negotiations to end the war, only to be thwarted by the West.
“Russia reached out to Ukraine to start negotiations to end the war and work out a modus vivendi between the two countries. [...] All the available evidence indicates that the Russia was negotiating seriously and was not interested in absorbing Ukrainian territory, save for Crimea, which they had annexed in 2014, and possibly the Donbass. The negotiations ended when the Ukrainians, with prodding from Britain and the United States, walked away from the negotiations, which were making good progress when they ended.”
Given that Putin strongly preferred preventing Ukraine from joining NATO over going to war, then what powerful national leader at the time thought war with Russia was a worthwhile cost to pay for Ukraine to join NATO and pushed the Ukrainians to fight Russia by arming them with weapons and cash?
In March 2022, President Biden said the quiet part out loud, implying that he hoped to use Ukraine to achieve regime change in Moscow.
“This battle will not be won in days or months [...] we need to steel ourselves for the long fight ahead.”
“Ukraine will never be a victory for Russia, for free people refuse to live in a world of hopelessness and darkness. We will have a different future, a brighter future rooted in democracy and principle, hope and light, of decency and dignity, of freedom and possibilities. For God’s sake, this man [Putin] cannot remain in power.”
Although the White House later downplayed the remark, under Biden, the US government allocated $183b and spent $83b on aid to Ukraine. Biden engaged in what he described in 2022 as a “long fight ahead” despite likely knowing it could cost Democrats the presidency in 20243, indicating just how high of a priority defeating Putin was to President Biden.
How China-Taiwan is Different
While the West consistently underestimated the Russian military before the start of the Ukraine war in 2022, to devastating effect for Ukraine, no Western leader is going to underestimate Beijing.
In retrospect, what Russia most lacked was a conventional military deterrent strong enough to prevent the West from considering NATO expansion into Ukraine. With the PLA’s military buildup, the message from China to the West is clear4:
Taiwan is our internal issue. Don’t get involved.
The West is listening. During trade talks with China, Trump blocked Taiwan President Lai from briefly stopping in the US, undoubtedly as a concession to Beijing.
China clearly has forms of leverage over the West (e.g. strong military, exclusive supplier of key inputs like rare earths) that Russia lacked. As evidenced by Russia’s inability to use diplomacy to prevent Ukraine from joining NATO and Russia’s need to invade to stop this, the stronger China’s military is, the less likely it will need to be used on the battlefield.
Consistently building up the PLA’s military capabilities over the past few decades while having not fought any war in 46 years, the Chinese know the highest and best use of a strong military is not to deploy it on the battlefield.
“Hence to fight and conquer in all your battles is not supreme excellence; supreme excellence consists in breaking the enemy’s resistance without fighting.” - Sun Tzu
Why Taiwan Also Isn’t Hong Kong
There's a common, almost reflexive, assumption in some circles that Taiwan is just waiting to become Hong Kong 2.0. It’s not. Here are a few key distinctions.
1. End of New Territories lease in 1997
In 1898, the UK signed a deal with Qing China to lease the New Territories, the entire light purple part of this map, for 99 years.
Fast forward to 1982, with the 1997 expiration date looming just 15 years out, Beijing made it abundantly clear: there would be no renewal.
The New Territories comprised a whopping 86% of Hong Kong's land, 60% of the population5, and much of the city’s critical infrastructure. It was "economically and logistically infeasible" to just hand back New Territories and keep the remaining, much smaller portion of HK. The UK, facing a ticking clock and a determined landlord in Beijing, had precious little leverage. The whole thing went back to China.
Taiwan, of course, has no such expiring lease hanging over its head. Rather, its existence stems from the result of an unresolved conflict with the mainland from more than 70 years ago.
This means Beijing's ability to achieve reunification doesn't come with a convenient contractual deadline. It hinges, instead, largely on the threat of military action, which is a rather more complicated proposition.
2. Defensibility
Hong Kong's proximity to mainland China, and its geography, made any serious military defense a non-starter. Margaret Thatcher herself recounted Deng Xiaoping's rather blunt assessment: "I could walk in and take the whole lot this afternoon." Her reply was basically, "Well, yes, but think of the PR." Not exactly a robust defense posture.
Hong Kong is basically the anti-Switzerland: no mountains to speak of for defense, no vast ocean moat, and no highly trained army. Taking it, for a power controlling Mainland China, is relatively straightforward. Imperial Japan managed it in under three weeks back in December 1941 while it was simultaneously fighting in China, the Pacific, and Southeast Asia.
Taiwan, however, is a different kettle of fish. Or, to use John Mearsheimer's framing in a Lex Fridman interview, it's about a "big body of water called the Taiwan Strait." Mearsheimer's point is simple but profound: invading across water is hard. Really hard.
"If you're a country and I'm a country and there's land between us, I can take my Panzer divisions and I can go right across the land and attack your country."
Easy peasy, relatively speaking.
But, "if there's a big body of water between us, in a world where you have lots of submarines, aircraft, land-based missiles that can hit those surface ships, it is very, very hard to attack across a body of water."
His go-to example? The Allied invasion of Normandy in 1944. A massive, costly, and incredibly risky undertaking.
The Taiwan Strait is wider and often stormier than the English Channel. Plus, unlike 1944, we now live in an age of satellites. Any significant amphibious invasion force preparing to set sail wouldn't exactly be a surprise. Taiwan would know. The world would know. The element of a sudden, overwhelming shock is largely off the table. No one is "walking in and taking" Taiwan in an afternoon.
Because of Taiwan’s defensibility and the lack of any expiring lease, the Sino-British talks over Hong Kong are a largely inapplicable precedent for any future Beijing-Taipei discussions, but there is one key aspect about Taiwan that is easier for Beijing compared to HK.
3. Lost in Translation (Or Not, For Taiwan)
A significant hurdle for Beijing in Hong Kong after the 1997 handover was winning hearts and minds. This effort, or lack thereof in some views, culminated in the city's most intense protests and riots in 2019.
A major contributing factor? Language. Hongkongers predominantly speak Cantonese. Mainlanders predominantly speak Mandarin.
For many Hong Kong protesters, Mandarin was perceived as the language of an encroaching, unwelcome authority and community. As a result, the protesters often harassed and attacked Mandarin speakers, even those from Taiwan, Singapore, and North America.
This linguistic barrier between Hong Kong and Mainland China made it tough for mainland Chinese culture to gain traction, let alone the kind of soft power that might cultivate a sense of shared national pride.
Now, pivot to Taiwan. The Taiwanese, by and large, share a common language with the mainland: Mandarin. This is not a small thing. For the younger generation, this shared language means that content from mainland Chinese apps like TikTok and Xiaohongshu (RedNote) is easily accessible and consumable. Despite the Great Firewall, a significant amount of Chinese content ends up on platforms like YouTube.
A Mandarin teacher in Taiwan, Chu Yi-chun, notes:
“Even if they consume American, Japanese, Korean or whatever else on TikTok, they absorb Chinese content most easily. They include Chinese cultural references and lingo from that content in their speech and writing.”
Mainland Chinese influence on Taiwan’s young people have become more apparent over time.
"Smaller-scale studies have found that many Chinese slang words have entered Taiwan’s youth lexicon in the past three years. The northern Chinese term “niu” (meaning “awesome”) was unheard of in Taiwan until recently, but now appears commonly on teenagers’ social media feeds and in real life. Other Chinese-influenced memes and games have become commonplace, teachers say."
This cultural seepage is happening against a backdrop of China's expanding global soft power. If you throw in an erratic and unpredictable U.S. administration that antagonizes historical allies, including Taiwan, a growing number of Taiwanese might start to see some pragmatic advantages in aligning with a culturally familiar and economically and militarily powerful neighbor.
Indeed, Taiwan's Gen Z, having come of age during China's ascent to global superpower status, appears to be cultivating a distinctly realistic view of their giant neighbor. When high school students were quizzed on the optimal survival strategy for Taiwan, the overwhelming response was that Taiwan must do everything in its power to avoid provoking a Chinese attack.
“Almost without exception, they wrote that, being small and weak, Taiwan must avoid appearing as a threat to China. No matter how they harass us, we must tolerate it.”
This is not the language of students preparing to storm the legislature to block trade deals with China, as happened during the 2014 Sunflower Student Movement.
Since then, the outlook of young Taiwanese has shifted significantly.
"According to data published by the Taiwanese Public Opinion Foundation polling organisation last year, people between 20 and 24 are no longer the age group who feel their Taiwanese identity the strongest, bucking a long-established pattern. And there are indications that, among young people, Taiwan’s decades-old trend towards ever stronger support for independence might also be going into reverse."
Much has changed in the attitudes of Taiwanese students towards China since the Sunflower Movement 11 years ago, and much will continue to change over the coming decades due to China’s growing hard and soft power.
"Taiwanese educators and researchers fear that the ever greater numbers of children using [Chinese apps] risk being exposed to content that seems innocent, but causes them to look more favourably upon the People’s Republic and feel more negative towards their own nation — something they suspect is a deliberate strategy by Beijing."
This shouldn't be surprising. Reunification has been Beijing's #1 priority6 since the PRC's founding in 1949. It's their North Star, but this doesn’t mean invasion is inevitable or even likely.
The Dangling Sword (and Why It Will Just Dangle)
For those who see Chinese warships on the horizon at every news cycle, it's worth remembering a core tenet about Beijing's leadership, as articulated by geopolitical expert John Mearsheimer: "the Chinese are realists to the core." This isn't to say they don't have grand ambitions, but cost-benefit analysis rules the day for them.
An actual invasion of Taiwan, as discussed, presents a veritable minefield of obstacles. It would be incredibly messy, with potentially devastating second-order consequences that could seriously undermine the Communist Party's own stability. Think about it: the risk of triggering a wider conflict (hello, nuclear deterrence), the certainty of crippling economic sanctions that would gut their export-driven economy, and the high probability of sparking significant social unrest at home due to an inevitable economic slowdown. The PLA might well "win" an invasion, given enough time and a willingness to absorb horrific losses, but Beijing cannot afford the aftermath.
So, the possibility of invasion, the military drills, the missile tests, and the probing of Taiwan's Air Defense Identification Zone (ADIZ) are less about an imminent D-Day and more about maintaining a proverbial Sword of Damocles over Taipei.
Beijing will undoubtedly continue to sharpen this sword to motivate a greater willingness for Taipei to come to the negotiating table. But Beijing is also acutely aware that if that sword were to actually fall, the consequences for the PRC itself could be catastrophic.
This is China’s two-pronged approach: the carrot of burgeoning soft power and economic integration, and the stick of an ever-present, ever-improving military capability. With both of these elements growing, China can afford to play the long game. It can infiltrate Taiwan’s government and military7, exploit divisions within Taiwan society, leverage its economic might, and use their shared language to allow its media to create compelling content that influences a generation of Taiwanese to think more positively about China.
The Surprisingly Chill Cold War Across the Strait
Given the constant drumbeat of "imminent invasion" talk, it's almost jarring to remember a simple fact:
The Taiwan Strait has been totally peaceful for almost 70 years.
The last time a combat-related death occurred between the PRC and the ROC was in 1958, during the Second Taiwan Strait Crisis over the ROC-controlled islands of Kinmen and Matsu. That's 67 years ago.
Compare this to other geopolitically contentious relationships and the most recent instance where a person on one side was killed by the other side in combat: India-Pakistan (2025), Israel-Palestine (2025), Israel-Iran (2025), Russia-Ukraine (2025), North and South Korea (2020). These adversaries have caused far more frequent and recent bloodshed compared to China and Taiwan.
A nearly seven-decade peace despite underlying tension is not an accident. It suggests a deeply ingrained, if unspoken, understanding in both Beijing and Taipei that armed conflict is not the way to resolve their differences.
One of the clearest, most unambiguous signs of progress towards a less overtly hostile peace is the curious evolution of the Kuomintang’s (KMT) attitude towards the CCP in Taiwan. Today, in the complex dance of Taiwanese politics, the KMT is the strongest advocate for closer, more amicable relations with Mainland China.
During and for decades after the Chinese Civil War, the Chinese Communist Party and the KMT were mortal enemies. One can only imagine Mao Zedong and Chiang Kai-shek, having presided over one of the 20th century's bloodiest conflicts against the other, rolling in their graves at the thought of their political successors seeking closer, peaceful ties.
Beijing understands a crucial lesson from history: the death and destruction wrought by war breeds a uniquely virulent, generational hatred and resistance. It fosters future rebellions. This is the unfortunate emotional landscape between Indians and Pakistanis, Israelis and Palestinians, and Russians and Ukrainians.
The long peace between Beijing and Taipei means that this deep-seated, visceral animosity is largely absent. Mainlanders and Taiwanese routinely travel across the strait for work, study, tourism, and business, with Taiwanese making over four million trips to Mainland China in 2024, up 54% from 2023.
This Japanese proverb8 certainly is true when it comes to top leaders on both sides and the people they govern.
"The tops of the trees do not touch, but their roots are intertwined."
Beijing understands the importance of preserving peace in order to have the right starting point for constructive negotiations. Any military attack would unite the Taiwanese against Beijing, a counterproductive action given that Taiwan is a deeply divided democracy.
No Chinese leader, including Xi, wants to go down in history as the person who ended 70 years of peace in the Taiwan Strait.
The Negotiation Table: Taiwan's Unexpected Leverage
In April 2024, President Xi told former Taiwan President Ma Ying-jeou (translated):
"People on both sides of the Taiwan Strait are all Chinese. There are no knots in our hearts that cannot be untied. There are no problems that cannot be discussed. There is no force that can separate us." (emphasis added)
Despite the growing power disparity between Beijing and Taipei, Taiwan actually approaches this hypothetical negotiation table with more leverage than many seem to believe. Taiwan’s high defensibility, combined with the absence of an imminently expiring lease, means Beijing can't just impose its will.
"One Country, Two Systems" as implemented in Hong Kong is unpopular even with the KMT, the most pro-China major political party in Taiwan.
Historically, direct negotiations between Beijing and Taipei have focused on pragmatic economic and trade issues, like hammering out trade agreements. It's a reasonable assumption that future cross-strait negotiations under a non-DPP Taiwanese administration would continue to prioritize economic integration over politically fraught questions of sovereignty.
Given Taiwan's defensive strengths and the severe downsides of an invasion for China, Taipei could negotiate a governance framework with major differences compared to the version of One Country, Two Systems as currently implemented in Hong Kong9.
Who Best To Negotiate With Beijing On Behalf Of Taiwan?
In Beijing's eyes, the answer is simple: pretty much any Taiwanese president not from the Democratic Progressive Party (DPP). The DPP's charter explicitly rejects the "One China" principle and the 1992 Consensus, making them a non-starter for direct, official talks with Beijing.
The 2024 Taiwanese presidential election results offer some insight here. While the DPP candidate won, it was with only 40% of the vote, and the party lost its legislative majority. This suggests that 60% of the Taiwanese electorate is not interested in direct confrontation with Beijing.
So what do they want? Polls and economic indicators suggest a focus on bread-and-butter issues: rising wages (which have been stagnant for decades) and affordable housing10. They also want to preserve their system, rights, and freedoms.
Crucially, most appear to have no appetite for a devastating war they are unlikely to win against a vastly more powerful neighbor.
A majority (66%) of Taiwanese are unwilling to pay higher taxes to strengthen the island's military.
Mandatory military service, currently one year for able-bodied men, is deeply unpopular. Reports of at least 120 men, including 11 celebrities, being arrested for falsifying health records to evade the draft underscore this sentiment.
"In recent decades, Taiwan’s people have seen their military in a negative light due to perceptions that mandatory military service is a 'waste of time' and that Taiwan’s chances of prevailing in a war against China are meager as the gap in military capabilities continues to widen across the Taiwan Strait."
The government has resorted to threatening seven-year prison sentences to enforce conscription, which is supposed to be a civic duty.
Ironically, this is one of the areas where Noah Smith's observations are right:
"Even as the titanic battle-fleets of a menacing empire surround their home, even as the empire’s state media bellow threats of war, Taiwanese people stroll through night markets and sip Ruby #18 tea and line up for the latest cat cafe. There is an easy, laid-back tranquility to this culture like nothing I’ve ever seen, not even in Amsterdam or a California beach town."
This tranquility isn't born of ignorance or a rabbit-like obliviousness. It stems from a pragmatic understanding that:
China, for all its bluster, would strongly prefer not to invade
Taiwan itself holds a powerful key to de-escalation: the choice to negotiate and give up some degree of sovereignty and autonomy in exchange for guaranteed peace.
The 2049 Deadline and the Pull of History
For the Chinese Communist Party, the "Taiwan issue" is more than just a geopolitical objective; it's the final, crucial chapter in their narrative of national rejuvenation. It's about formally ending the Chinese Civil War, erasing the last vestiges of the "century of humiliation," and completing the restoration of the Chinese nation. The year 2049, the 100th anniversary of the People's Republic of China, is often cited as the target date for achieving reunification. For Beijing, Taiwan is the ultimate, non-negotiable red line.
Given China’s unwavering determination, their multi-pronged approach (economic incentives, cultural outreach, diplomatic pressure, and the ever-present military option held in reserve), and their demonstrated willingness to play the very long game, it seems more likely than not that Beijing will eventually achieve an outcome it deems acceptable.
Conclusion: The Path of Peace
When all the pieces are on the board—the economic self-interest of China, the deterrent effect of potential nuclear escalation, the surprisingly long history of actual peace across the strait, the growing cultural and linguistic bridges, the sheer military difficulty of an amphibious invasion, and the apparent pragmatism on both sides (Beijing's realism, Taiwan's desire to avoid an unwinnable conflict)—the scale tips away from imminent, large-scale war.
Beijing’s long-term strategy favors soft power, economic integration, and patient diplomacy (with a sharpened sword kept visible, just in case). Coupled with Taiwan's inherent defensibility and a populace that seems to prefer prosperity and peace over a doomed military showdown, the most probable path forward is one of continued, complex interaction, negotiation, and gradual evolution, rather than a sudden, violent confrontation.
About
Inverteum Limited (HK) is a trading firm that specializes in long-short algorithmic strategies to generate returns in both bull and bear markets.
Inverteum has generated 52% annualized returns (39% after fees) since inception.
How We Invest
Minimize allocation to individual stocks due to their unpredictability
Build the most suitable trading strategy and go all in. Here's a sample trading strategy.
Be prepared for bear markets and ensure profitability during bad times by implementing a short selling component to the strategy.
On a May 2025 trip to a factory in Luoyang, China, President Xi spoke to workers (translated):
We are committed to the path of developing the real economy. In the past, we relied on foreign matches, soap, and iron. Now, we’ve become the world’s leading manufacturing nation. This path has proven right. Chinese-style modernization requires us to keep strengthening manufacturing. We must master our own manufacturing technology. Only then can we truly achieve Chinese-style modernization.
Chinese stocks trade at half the valuation of US stocks. P/E: S&P 500 (28), MSCI China (15).
Biden’s strong commitment to Ukraine contributed to swing voters’ perception that Democrats cared more about Ukraine than inflation, which likely played a part in preventing Biden’s successor Kamala Harris from winning the presidency.
A June 2024 Chicago Council poll found that 54% of independents agreed with this statement: “Because the United States has limited resources and its own problems at home, it needs to reduce its involvement in world affairs.”
“Chinese Defense Minister Dong Jun reaffirmed on Thursday that the People’s Liberation Army will never allow any attempt for “Taiwan independence” to succeed, stressing that it is prepared to thwart any external military interference on the Taiwan question at any time.”
Combined population of New Kowloon, New Territories, and Marine in 1981
When Henry Kissinger, Nixon’s Secretary of State, had his groundbreaking meeting with PRC Premier Zhou Enlai in 1971, Kissinger reportedly wanted to discuss a whole menu of global issues. Zhou Enlai, however, had one item at the very top of his agenda, an issue he returned to repeatedly: Taiwan.
Those who oppose such infiltration should be thankful China has not adopted America’s approach to dealing with governments it doesn’t like.
木の葉は触れ合わず、根は絡み合う (Ki no ha wa fureauzu, ne wa karamiau)
One Country, Two Systems is not a monolithic framework that is the same in every Special Administrative Region (SAR). The two current implementations of One Country, Two Systems, in HK and Macau respectively, are different from each other due to differences in economic structure and British and Portuguese governance.
There’s no question that any potential form of 1C2S implemented in Taiwan would have uniquely Taiwanese characteristics and differences.
Consider these numbers: Taiwan’s median wage is a 53% of its per capita GDP, and its minimum wage is only 31%. This is compared to averages of 80% and 40%, respectively, among other advanced economies. On housing, Taiwanese workers apparently have to spend an average of 42.1% of their disposable household income on housing, versus only 15% in other advanced economies. These are real pressures.
The Chinese have 5,000 years of caring mostly about one thing - good fortune. It's sheer ignorance to believe they'd behave differently, let alone risk a war with America the unpredictable.
I shared the same viewpoint from a militaristic perspective: https://kainesianmacro.substack.com/p/how-china-will-struggle-to-invade